Brent oil to hit $65 by this summer, according to Goldman Sachs

Published Mon, Jan 11 20212:20 PM EST

(This story is for CNBC PRO subscribers only.) Goldman Sachs is pulling forward its oil forecast following OPEC's meeting last week as well as the Georgia run-off elections, both of which the firm said will help neutralize near-term risks. Goldman now sees Brent hitting $65 per barrel by this summer, ahead of prior forecasts for the contract to reach that level by the end of the year. Saudi Arabia last week announced a voluntary production cut of one million barrels per day beginning in February and extending through March, which Goldman said "neutralized current lockdown risks but more importantly [sets] the stage for a tighter market as the vaccine roll-out accelerates this spring." Analysts led by Jeffrey Currie said that the likelihood of the market tightening in the second quarter is rising. Oil prices advancing could, in theory, lead to U.S. producers turning on the taps. But Currie doesn't anticipate this, saying he believes the response from the U.S. shale industry will be muted based on higher capital costs and producer discipline. "OPEC+ March production level will still be near the recent lows just as global demand starts rebounding sharply driven by warmer weather and rising vaccinations," he said. With producers struggling to meet an uptick in demand, Goldman anticipates a 1.3 million barrel per day deficit in April through July. On Monday Brent crude futures were slightly lower, trading around $55.78 per barrel. Last week the contract jumped to its highest level since February, and posted its ninth positive week in 10. Currie also pointed to the Georgia runoff election and the possibility of more stimulus as supportive for commodities. With Democrats set to control the White House and Congress, Goldman forecasts another $750 billion in fiscal stimulus. "The broader stimulus effect — including green investment —helps oil demand long before it hurts oil demand," said Currie. He noted that $2 trillion of green stimulus over 2021 to 2022 would lead to a roughly 200,000 barrel per day jump in U.S. demand. With the stock market hovering around an all-time high, commodities could also act as a safe haven for investors should equities turn south. Pointing to when the dotcom bubble burst in March 2000, Currie noted that commodities rallied another 30% that year and didn't sell-off until the following Sept. "Unlike equities, commodities have a tangible and unavoidable physical supply and demand response to price moves that anchors those prices in the real world," he said. - CNBC's Michael Bloom contributed reporting.

Pump jacks operate at sunset in Midland, Texas, U.S., February 11, 2019.

Nick Oxford | Reuters

(This story is for CNBC PRO subscribers only.)

Goldman Sachs is pulling forward its oil forecast following OPEC's meeting last week as well as the Georgia run-off elections, both of which the firm said will help neutralize near-term risks.

Goldman now sees Brent hitting $65 per barrel by this summer, ahead of prior forecasts for the contract to reach that level by the end of the year.

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